If I have a portfolio that is 1/3 A and 2/3 B and A has a...

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If I have a portfolio that is 1/3 A and 2/3 B and A has a...

If I have a portfolio that is 1/3 A and 2/3 B and A has a mean of 9 and a variance of 3, and B has a mean of 6 and a variance of 1, and the two have a covariance of ‐1, find the expected return of this portfolio.

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Answer 1

Answer #1

The expected return is weighted average of the mean of the two stocks

2 weights in portfolio 3 mean 0.333333333 0.666666667 2 5 expected return 7

2 weights in portfolio 2/3 9 4 5 expected return (C2 C3)+(D2*D3)

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Answer 2

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